Tanzania wins $7m damages from Biwater subsidiary

A tap which used to provide free water for the residents of Manzese Squatter area and has been closed by the private water company, City Water.

This week, a London tribunal operating under the laws of United Nations Commission on International Trade Law (UNCITRAL), threw out a case against Tanzania brought by City Water Services, a subsidiary of British company Biwater. The tribunal consequently awarded the Tanzanian government $6 million in damages, and $1 million in legal costs.

The ruling is a small victory in a complex legal battle still being fought in other courts. It however vindicates the Tanzanian government, which terminated City Water’s contract to run water system in Dar es Salaam in 2005 after poor performance. It also vindicates local and international campaigners who are against water privatization plans in poor countries.

Despite public outcry that water supply should never be privatized due to its sensitive nature, Dar es Salaam’s public water utility company, DAWASA, handed over its operations to City Water in 2003 with the expectation that the approximately 3 million residents of Dar es Salaam will get improved water supply. Instead, within the 2 years of City Water, water availability in the city actually got worse compared to DAWASA days.

According to the London based Water Development Movement, “water privatisation was imposed on that country [Tanzania] by the World Bank in return for much needed debt relief”. Another campaign group, Food and Water Watch stated that, “Biwater benefited from a non-competitive contract process and financial backing from the World Bank [as well as the UK government], but it still managed to mismanage the project”.

Ruling is expected anytime this year in a separate legal case lodged by Biwater at the International Centre for the Settlement of Investment Disputes (ICSID) against the government of Tanzania. The case is being held in secrecy at The Hague and is thought to involve a claim for approximately US$20 million.

The negative experience in Tanzania is not an isolated case. In many poor countries, for example, Bolivia, Mali and The Gambia, water privatisation has consistently failed to deliver clean, affordable water to the poor.